Practice Tip: The Fine Art of Safely Lifting Litigation Holds

By definition, a litigation hold may be lifted when the underlying litigation ends and no further litigation on the same topic can be reasonably anticipated. This deceptively simple statement obscures the fact that the line between litigation and non-litigation forms of dispute resolution, and the line between pending and completed litigation, can be hard to find.

Courts concur that “'litigation' includes any proceeding in a court or administrative tribunal in which the parties have the right to cross-examine witnesses or to subject an opposing party's presentation of proof to equivalent disputation.” U.S. v. American Tel. & Tel. Co., 86 F.R.D. 603, 627 (D.D.C. 1979). This may include proceedings or investigations launched by a regulatory or law enforcement official, court-sponsored alternative dispute resolution, and non-court-sponsored arbitrations and mediations in which cross-examination of witnesses and the introduction of evidence is permitted.

A standard two-party suit may be completed by the entry of a final judgment or the court's approval of a release, settlement agreement and dismissal order, but modern litigation often takes on a much more complex cast. Multi-party litigation involving counter- or cross-claims, regulatory actions brought as an adjunct to court actions, and government investigations leading to or resulting from litigation, complicate the decision over when a piece of litigation has actually ended.

While the end of a court's jurisdiction over a case may signal the end of litigation, that event alone is necessary but not sufficient to justify lifting a litigation hold. Other factors to consider may include the following:

• Does any party have a potential contribution or indemnity action that will survive the conclusion of the underlying case?
• Has the client's insurer disputed coverage or the cost of defending the case?
• Have all regulatory, third-party or other ancillary adversarial proceedings also been completed or has the applicable statute of limitations run on any potential ancillary litigation?
• Are attorneys' fees recoverable and, if so, has the period for a fee petition passed?
• Are there outstanding liens from any source?
• Did the litigation result in client participation in a joint defense group? Has the joint defense group disbanded its collective efforts? Does the written joint defense agreement, if any, contain language that, in the absence of a formal termination of the agreement, would support an inference that the defendants believe the litigation still to be pending?

A court may not find that a piece of litigation has ended ' and, correspondingly, may find that a litigation hold should not be lifted ' until all ancillary or related adversarial proceedings have also come to a complete end. Alternately, a court may find that some, if not all, of a litigation hold in the underlying case should continue in force until the spin-off proceedings are concluded.

When Should Further Litigation Be 'Reasonably Anticipated'?

Even though a case may have completely concluded, companies and counsel should consider carefully whether further related or parallel litigation should be “reasonably anticipated” before lifting an existing litigation hold. Courts articulate varied standards of what constitutes a reasonable anticipation of litigation and the analysis is always jurisdiction-specific and fact-specific. In general, litigation can be reasonably anticipated where there is anything from an “identifiable specific claim” (Paris v. R.P. Scherer Corp., No. 02-1044 (AET), 2006 WL 1982876 (D.N.J. Jul 13, 2006)), to more general “information ' that a claim, demand or charge [is] in prospect.” (United States v. AT&T, 86 F.R.D. 603 (D.D.C. 1980)). Some courts have adopted a rather wide view that a litigation hold is required where a party “should have known that the evidence may be relevant to future litigation,” without elaborating on how one determines that “future litigation” might ensue. Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 436 (2d Cir. 2001). Notably, litigation can be anticipated, even though the events that give rise to it have not yet occurred. US v. Adlman, 134 F.3d 1994, 1501 (2nd Cir. 1998).

What factors should counsel consider in determining whether litigation is reasonably anticipated such that an existing litigation hold should not be lifted, even though the specific case in which it was imposed is now over?

Part of the answer to this question resides in the character of the completed case and the apparent motivations of its counsel. Plaintiffs claiming individualized injury and represented by a traditional plaintiff's firm are more likely to produce one-off claims, while plaintiffs claiming a more universal injury ' usually economic ' or bringing socially-motivated claims prosecuted by lawyers paid by advocacy groups may take on a more persistent life. An attorney general's suit involving consumer products may lead, after its resolution, to individual claims. M&T Mortgage v. Miller, 2007 WL 2403564 (E.D.N.Y. Aug. 17, 2007). Lifting a litigation hold following the resolution of a putative class claim is particularly treacherous, since the presence of opt-out plaintiffs or other circumstances peculiar to the case may signal individual claims to follow.

The procedural mechanism by which the underlying claim is
resolved is also significant. A case, which is dismissed on the pleadings with prejudice, and the dismissal of which is affirmed by a united appellate court, leaves little reason to
suspect further litigation on the same topic. Affirmance of a trial court's dismissal that draws a strong dissent or a defense victory on summary judgment, in and of themselves, may be as decisive a justification for lifting a litigation hold.

Where a litigation generates an investigation that outlasts the underlying suit, whether by law enforcement, a regulatory agency, or a company's own board or auditor, that investigation may likewise give rise to a reasonable anticipation of future litigation, depending on its outcome. M&T Mortgage, supra, 2007 WL 2403565 at *2, 5; In re Grand Jury Proceedings, 2001 WL 1167497 (S.D.N.Y. Oct. 3, 2001). A litigation hold should not be lifted where such an investigation overlaps with or can be expected to follow the completion of an underlying case.

Other circumstances that companies and counsel should consider in determining whether litigation is reasonably anticipated, such that a litigation hold should not be lifted, include:

• The receipt of statutory or contractual notices of intent to sue, until the applicable statute of limitations has run;
• Circumstances that appear to give rise to potential injunctive or declaratory actions;
• Regulatory proceedings that are not themselves adversarial, but could reasonably be expected to lead to later litigation; and
• A history of claims or litigation over the same issue, product or right.

Assuming that a company and its counsel determine that litigation involving the same documents or things cannot be reasonably anticipated, the next challenge they face is how to implement the lifting of an existing hold. Make no mistake: One cannot simply reverse the litigation hold order and walk away.

Practical Tips for Lifting Litigation Holds

The existence of a litigation hold generally presupposes that the client has a document retention policy of some sort in place. However, if the client does not, or if its policy has not been updated in some time, the process of lifting a hold is an excellent opportunity to put the client on a better footing overall by drafting or updating that policy and by providing employee training in its day-to-day application. Even if the client has an updated document retention policy, and whatever form the process of lifting a hold takes, counsel will need to communicate directly with the client's employees and lead them through this process. It is important to proceed in an organized, principled and consistent manner in order to avoid a later charge ' should the lifting of the hold be premature ' that the company rushed to destroy allegedly adverse evidence at the earliest possible moment.

When should you lift a litigation hold? This ticklish question must be answered on a case-by-case, company-by-company basis. Obviously, if the company is entitled to destroy documents that are no longer needed in the course of its business and no longer the subject of a hold, it should do so in an expeditious and business-like manner. However, if the company rushes to destroy materials in a brief “window of opportunity” between the end of one piece of litigation and the start of another, such conduct may be considered evidence that the company should have anticipated or actually did anticipate the second litigation. Prudence suggests waiting for a period of time after an initial litigation is concluded in order to avoid the appearance that a litigation hold has been lifted in order to prevent the anticipated future discovery of information, rather than as a legitimate part of the company's ordinary business operations.

Who should lift a litigation hold? If a company's document retention policy dictates the answer, the designated person should be the one to lift the hold, even if other company executives disagree with his or her judgment on the timing or other aspects of the process. If no retention policy exists, logically, the same person (or the person in the same position) who imposed the hold should be responsible for lifting it, but in no circumstance should a litigation hold be lifted without the documented advice of counsel.

How should a hold be lifted? In order to conduct an orderly, organized hold-lifting process, instructions should be provided in writing to all employees at the same time. Those instructions should spell out exactly what hold or holds are being lifted, the impact of lifting one hold on other existing holds (if any), a timetable, and a supervised process for collecting and destroying retained materials. Where lifting one hold may impact the continuation of another, or in any other situation where judgments may be made by individual employees, it would be wise to provide training or retraining in the company's governing document retention policy before the hold is lifted.

How does one lift a hold on documents held by third parties? Lifting a litigation hold is obviously less effective if the documents the company destroys under its document retention policy are held in perpetuity by other litigants or third parties. One way to control this problem is to negotiate a Rule 26(f) agreement at the start of litigation that requires that all parties return or certify the destruction of at least those companies' confidential and/or privileged materials produced in discovery. Moreover, if the company has used a third party vendor to auto-archive electronic data during litigation, the company should ensure that this vendor routinely overwrites or destroys back-up tapes or other potential sources of company information.

How are materials best destroyed? Currently, paper documents can be adequately destroyed by a shredding process that prevents the reassembly of the document. Hard drives and other electronic media being sent out for destruction should be “wiped” with software or a magnet, or otherwise rendered forensically irretrievable before they leave the company's control. Vendors will be able to advise about the destruction of tapes, photographs and objects. In every instance where the materials are destroyed by a vendor, the company should obtain a certification that the destruction process comports with the existing industry standard and that the destruction is complete.

Conclusion

Properly lifting a litigation hold can be a challenge and doing so in a disorganized, spontaneous or ill-timed way can be very risky. Implementing a consistent, organized and disciplined hold-lifting process ' and documenting its implementation ' will help to shield companies and their counsel from later spoliation claims.

Sarah ('Sally') L. Olson, a member of this newsletter's Board of Editors, is a partner in the Litigation Department of Wildman, Harrold, Allen & Dixon, LLP, in Chicago, where she is a Litigation Practice Group Leader, and the Chair of the firm's Diversity Committee. Ms. Olson represents manufacturing companies and, through trade associations, industries facing litigation, legislative change, or regulatory action in relation to the design, manufacture, marketing, and distribution of their products.

Over the last five years, companies and counsel have been sensitized to the dangers of mishandling the duty to preserve documents, and particularly electronic documents, relevant to pending or reasonably anticipated litigation. Examples abound of penalties assessed ' whether monetary or evidentiary ' for failures to impose, monitor and enforce appropriate litigation holds. However, far less attention has been paid to the other half of the equation, the appropriate lifting of an existing litigation hold. To date, no case involving the lifting of a litigation hold has reached the appellate level; a few trial court decisions treat the subject tangentially. Though the topic gets a passing mention in legal periodicals from time to time, it is generally assumed that lifting a hold is a straightforward technical process. That assumption can be dangerously wrong.

Lifting a litigation hold requires legal analysis at least as substantial as the imposition of such a hold in the first place. Given that the end of a litigation is often characterized by multiple antagonisms, tense negotiations, the potential for third-party recrimination, and hostile miscommunication, lifting a hold on discoverable documents may actually be even more perilous and complex than imposing one. This article explores some of the legal and practical considerations that go into lifting a litigation hold, while minimizing the risk of the activity.

When Does Litigation End?

By definition, a litigation hold may be lifted when the underlying litigation ends and no further litigation on the same topic can be reasonably anticipated. This deceptively simple statement obscures the fact that the line between litigation and non-litigation forms of dispute resolution, and the line between pending and completed litigation, can be hard to find.

Courts concur that “'litigation' includes any proceeding in a court or administrative tribunal in which the parties have the right to cross-examine witnesses or to subject an opposing party's presentation of proof to equivalent disputation.” U.S. v. American Tel. & Tel. Co. , 86 F.R.D. 603, 627 (D.D.C. 1979). This may include proceedings or investigations launched by a regulatory or law enforcement official, court-sponsored alternative dispute resolution, and non-court-sponsored arbitrations and mediations in which cross-examination of witnesses and the introduction of evidence is permitted.

A standard two-party suit may be completed by the entry of a final judgment or the court's approval of a release, settlement agreement and dismissal order, but modern litigation often takes on a much more complex cast. Multi-party litigation involving counter- or cross-claims, regulatory actions brought as an adjunct to court actions, and government investigations leading to or resulting from litigation, complicate the decision over when a piece of litigation has actually ended.

While the end of a court's jurisdiction over a case may signal the end of litigation, that event alone is necessary but not sufficient to justify lifting a litigation hold. Other factors to consider may include the following:

• Does any party have a potential contribution or indemnity action that will survive the conclusion of the underlying case?
• Has the client's insurer disputed coverage or the cost of defending the case?
• Have all regulatory, third-party or other ancillary adversarial proceedings also been completed or has the applicable statute of limitations run on any potential ancillary litigation?
• Are attorneys' fees recoverable and, if so, has the period for a fee petition passed?
• Are there outstanding liens from any source?
• Did the litigation result in client participation in a joint defense group? Has the joint defense group disbanded its collective efforts? Does the written joint defense agreement, if any, contain language that, in the absence of a formal termination of the agreement, would support an inference that the defendants believe the litigation still to be pending?

A court may not find that a piece of litigation has ended ' and, correspondingly, may find that a litigation hold should not be lifted ' until all ancillary or related adversarial proceedings have also come to a complete end. Alternately, a court may find that some, if not all, of a litigation hold in the underlying case should continue in force until the spin-off proceedings are concluded.

When Should Further Litigation Be 'Reasonably Anticipated'?

Even though a case may have completely concluded, companies and counsel should consider carefully whether further related or parallel litigation should be “reasonably anticipated” before lifting an existing litigation hold. Courts articulate varied standards of what constitutes a reasonable anticipation of litigation and the analysis is always jurisdiction-specific and fact-specific. In general, litigation can be reasonably anticipated where there is anything from an “identifiable specific claim” (Paris v. R.P. Scherer Corp., No. 02-1044 (AET), 2006 WL 1982876 (D.N.J. Jul 13, 2006)), to more general “information ' that a claim, demand or charge [is] in prospect.” (United States v. AT&T, 86 F.R.D. 603 (D.D.C. 1980)). Some courts have adopted a rather wide view that a litigation hold is required where a party “should have known that the evidence may be relevant to future litigation,” without elaborating on how one determines that “future litigation” might ensue. Fujitsu Ltd. v. Federal Express Corp. , 247 F.3d 423, 436 (2d Cir. 2001). Notably, litigation can be anticipated, even though the events that give rise to it have not yet occurred. US v. Adlman , 134 F.3d 1994, 1501 (2nd Cir. 1998).

What factors should counsel consider in determining whether litigation is reasonably anticipated such that an existing litigation hold should not be lifted, even though the specific case in which it was imposed is now over?

Part of the answer to this question resides in the character of the completed case and the apparent motivations of its counsel. Plaintiffs claiming individualized injury and represented by a traditional plaintiff's firm are more likely to produce one-off claims, while plaintiffs claiming a more universal injury ' usually economic ' or bringing socially-motivated claims prosecuted by lawyers paid by advocacy groups may take on a more persistent life. An attorney general's suit involving consumer products may lead, after its resolution, to individual claims. M&T Mortgage v. Miller, 2007 WL 2403564 (E.D.N.Y. Aug. 17, 2007). Lifting a litigation hold following the resolution of a putative class claim is particularly treacherous, since the presence of opt-out plaintiffs or other circumstances peculiar to the case may signal individual claims to follow.

The procedural mechanism by which the underlying claim is
resolved is also significant. A case, which is dismissed on the pleadings with prejudice, and the dismissal of which is affirmed by a united appellate court, leaves little reason to
suspect further litigation on the same topic. Affirmance of a trial court's dismissal that draws a strong dissent or a defense victory on summary judgment, in and of themselves, may be as decisive a justification for lifting a litigation hold.

Where a litigation generates an investigation that outlasts the underlying suit, whether by law enforcement, a regulatory agency, or a company's own board or auditor, that investigation may likewise give rise to a reasonable anticipation of future litigation, depending on its outcome. M&T Mortgage, supra, 2007 WL 2403565 at *2, 5; In re Grand Jury Proceedings, 2001 WL 1167497 (S.D.N.Y. Oct. 3, 2001). A litigation hold should not be lifted where such an investigation overlaps with or can be expected to follow the completion of an underlying case.

Other circumstances that companies and counsel should consider in determining whether litigation is reasonably anticipated, such that a litigation hold should not be lifted, include:

• The receipt of statutory or contractual notices of intent to sue, until the applicable statute of limitations has run;
• Circumstances that appear to give rise to potential injunctive or declaratory actions;
• Regulatory proceedings that are not themselves adversarial, but could reasonably be expected to lead to later litigation; and
• A history of claims or litigation over the same issue, product or right.

Assuming that a company and its counsel determine that litigation involving the same documents or things cannot be reasonably anticipated, the next challenge they face is how to implement the lifting of an existing hold. Make no mistake: One cannot simply reverse the litigation hold order and walk away.

Practical Tips for Lifting Litigation Holds

The existence of a litigation hold generally presupposes that the client has a document retention policy of some sort in place. However, if the client does not, or if its policy has not been updated in some time, the process of lifting a hold is an excellent opportunity to put the client on a better footing overall by drafting or updating that policy and by providing employee training in its day-to-day application. Even if the client has an updated document retention policy, and whatever form the process of lifting a hold takes, counsel will need to communicate directly with the client's employees and lead them through this process. It is important to proceed in an organized, principled and consistent manner in order to avoid a later charge ' should the lifting of the hold be premature ' that the company rushed to destroy allegedly adverse evidence at the earliest possible moment.

When should you lift a litigation hold? This ticklish question must be answered on a case-by-case, company-by-company basis. Obviously, if the company is entitled to destroy documents that are no longer needed in the course of its business and no longer the subject of a hold, it should do so in an expeditious and business-like manner. However, if the company rushes to destroy materials in a brief “window of opportunity” between the end of one piece of litigation and the start of another, such conduct may be considered evidence that the company should have anticipated or actually did anticipate the second litigation. Prudence suggests waiting for a period of time after an initial litigation is concluded in order to avoid the appearance that a litigation hold has been lifted in order to prevent the anticipated future discovery of information, rather than as a legitimate part of the company's ordinary business operations.

Who should lift a litigation hold? If a company's document retention policy dictates the answer, the designated person should be the one to lift the hold, even if other company executives disagree with his or her judgment on the timing or other aspects of the process. If no retention policy exists, logically, the same person (or the person in the same position) who imposed the hold should be responsible for lifting it, but in no circumstance should a litigation hold be lifted without the documented advice of counsel.

How should a hold be lifted? In order to conduct an orderly, organized hold-lifting process, instructions should be provided in writing to all employees at the same time. Those instructions should spell out exactly what hold or holds are being lifted, the impact of lifting one hold on other existing holds (if any), a timetable, and a supervised process for collecting and destroying retained materials. Where lifting one hold may impact the continuation of another, or in any other situation where judgments may be made by individual employees, it would be wise to provide training or retraining in the company's governing document retention policy before the hold is lifted.

How does one lift a hold on documents held by third parties? Lifting a litigation hold is obviously less effective if the documents the company destroys under its document retention policy are held in perpetuity by other litigants or third parties. One way to control this problem is to negotiate a Rule 26(f) agreement at the start of litigation that requires that all parties return or certify the destruction of at least those companies' confidential and/or privileged materials produced in discovery. Moreover, if the company has used a third party vendor to auto-archive electronic data during litigation, the company should ensure that this vendor routinely overwrites or destroys back-up tapes or other potential sources of company information.

How are materials best destroyed? Currently, paper documents can be adequately destroyed by a shredding process that prevents the reassembly of the document. Hard drives and other electronic media being sent out for destruction should be “wiped” with software or a magnet, or otherwise rendered forensically irretrievable before they leave the company's control. Vendors will be able to advise about the destruction of tapes, photographs and objects. In every instance where the materials are destroyed by a vendor, the company should obtain a certification that the destruction process comports with the existing industry standard and that the destruction is complete.

Conclusion

Properly lifting a litigation hold can be a challenge and doing so in a disorganized, spontaneous or ill-timed way can be very risky. Implementing a consistent, organized and disciplined hold-lifting process ' and documenting its implementation ' will help to shield companies and their counsel from later spoliation claims.

Sarah ('Sally') L. Olson, a member of this newsletter's Board of Editors, is a partner in the Litigation Department of Wildman, Harrold, Allen & Dixon, LLP, in Chicago, where she is a Litigation Practice Group Leader, and the Chair of the firm's Diversity Committee. Ms. Olson represents manufacturing companies and, through trade associations, industries facing litigation, legislative change, or regulatory action in relation to the design, manufacture, marketing, and distribution of their products.